Now that the recession seems to be over, hawks are badgering him to start tightening the money supply to avoid inflation and an overheated economy. Bernanke's response is simple: What inflation? There's little evidence in the data, and even a cursory review of the morning papers suggests that the economy is still underheated. Bernanke repeatedly stressed that the big problem today is high unemployment, that places like Dillon are suffering, that persistent joblessness can create ripple effects that damage families, communities and the nation for generations.

O rly? That's absolutely hilarious. I point Grunwald to the post I did just two days ago (the one he links to is from December... so maybe he'll get to blind ass Bernanke a month from now):

Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.

U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president's Council of Economic Advisers, in testimony to Congress's Joint Economic Committee. But these increases, he said, "largely reflect strong economic fundamentals," such as strong growth in jobs, incomes and the number of new households.

And you believe this asshat when he tells you inflation is not a concern now? It's not like he missed a temporary blip in the massive macro framework of the economy that could have been easily bumped-off with a quick rate adjustment. The guy missed the fucking largest bubble in American history. Need more reasons why we rail on Bernanke?

K. I have plenty. Hope you have some time. (bwhahahaha, get it? Time? Fuck it, nevermind)

Many bubble deniers point to average prices for the country as a whole, which look worrisome but not totally crazy. When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone.

In Flatland, which occupies the middle of the country, it’s easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don’t really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can’t even get started.

But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions - hence “zoned” - makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up. And if people think that prices will continue to rise, they become willing to spend even more, driving prices still higher, and so on. In other words, the Zoned Zone is prone to housing bubbles.

And Zoned Zone housing prices, which have risen much faster than the national average, clearly point to a bubble.

When I wrote that I was thinking in particular of studies at the Fed that tried to rationalize aggregate national prices, but clearly had no explanation of the much bigger price increases in coastal areas.

That should be sufficient evidence to demonstrate my position. Let me know if you need more, I can pretty much keep this up forever. xoxo